While I work to keep this space politics free, there are a few times I have to comment… and this is one of them. Despite President Bush's discussion of health coverage last night, this is not my first discussion of Health Savings Accounts. As you might be able to tell from that one, I've had an HSA for almost two years now and can tell you about the experience so far.
Let's get this out of the way, HSA's are not for everyone. If you're quickly approaching retirement and/or have huge health care costs, then you probably already have a plan which distributes your costs over all of your coworkers or fellow taxpayers. Odds are this is the best plan for your dollar and the rest of this is irrelevant. Alternatively, if you're in your 20's or 30's and in relatively good health, an HSA might be ideal for you.
First, you're correct. An HSA by itself isn't going to do much for you if you get in a car accident, get cancer, etc, etc. But that's why getting an HSA requires catastrophic insurance too. The benefit of the HSA is that you can pay the deductible from this account and the contributions grow tax-free in the meantime. In addition, my catastrophic insurance covers annual checkups for the standard stuff. Ounce of prevention…
Now for some personal details… so far I've put a minimum of $100/month into the account each and every month with a bit more near the end of the year to avoid taxes. No, it's not a huge amount but it quickly gained momentum from compounding interest. This is similar to a 401k in the fact that contributing early and often can turn into huge sums of money eventually.
Next, spending money from the account has been brain dead simple. They started out with a checkbook and now have given me a debit card. The “payment process” is swiping the card. In theory, you could use this card for anything, but if you get audited, be prepared to produce your receipts/documentation.
Next, the “payment process” is swiping the card. Yes, I know I'm repeating myself, but consider that for a moment. The doctor's office doesn't have to fill out any forms. I don't get letters or bills from the insurance companies months later. I don't get more calls from the doctor's office about the insurance. When I walk out the door, they have their money and can forget about me. As a result of this, I've seen discounts ranging from 10-50%. My suspicion that the prices were inflated in the first place to provide some wiggle room with the insurance companies, but the economist in me points to the huge transaction costs I'm bypassing. I couldn't tell you which one is larger.
Finally, and this is the entire point of an HSA, it makes me stop and consider before I opt for every procedure regardless of what it costs. If everyone could buy a Ferrari for the price of a Ford Escort, everyone would buy a Ferrari, even if they just needed it to go buy groceries. In some cases, a moped may serve the purpose while other times you need a moving truck… but the fundamental problem is that what people need, what they choose, and what they pay are completely disconnected.
In summary, HSA's are incredibly useful but are not for everyone. Personally, if I join a company again with all the standard benefits, I plan to opt out of the coverage and convince them to fund my HSA for two reasons: First, I don't believe my coworkers should be required to pay for my bad health decisions. Second, the contributions would go with me and follow me for the rest of my life. Term health insurance ends the day you walk out the door.
You can get more info from HSA Insider.
* For those who may be interested, the image above is Aesculapius, the demigod of medicine and healing in ancient Greek mythology. See, you can learn something new here all the time. 😉